Station Casinos Profit Beats Estimates

LOS ANGELES/NEW YORK – Station Casinos Inc. (STN), a Las Vegas casino operator that caters to local residents rather than tourists, posted higher-than-expected quarterly profit on Monday as the city's economy boomed and population grew.

With about $5 billion of development now under way on the Las Vegas Strip (search), where many Station customers work, consumer confidence high and the city's population expected to grow 4 percent this year, Station expects continued earnings growth.

"We don't see any more supply coming quite some time that we don't control," Chief Financial Officer Glenn Christenson said during a conference call in which he raised earnings estimates for 2005 and 2006.

The company, which also manages tribal casinos, had fourth quarter net income of $38 million, or 55 cents a share, compared with a net loss of $8.6 million, or 14 cents a share, a year earlier, which included acquisition- and lawsuit-related charges.

"Station continues to benefit from ... new housing coupled with an extremely robust local economy where unemployment is at a multiyear low and new job formation continues at a torrid pace," said Bear Stearns analyst Joe Greff.

For the full year, Station raised its earnings outlook by about 4 percent to $2.22 to $2.35 a share, on revenue growth of 6 percent to 10 percent in Las Vegas, excluding Green Valley.

For 2006, the CFO also raised his earnings projection by about 4 percent to between $2.53 and $2.71 per share, with revenue growing in line with the region's population at 3 percent to 5 percent.

Analysts, on average, expect profit of 55 cents a share in the first quarter, $2.27 a share in 2005, and $2.61 a share in 2006.

"Continued strong demand in the Las Vegas market could lead to additional development projects" for Station Casinos, said Deutsche Bank analyst Marc Falcone.

The analyst raised his 12-month price target on the stock to $75 from $58, citing 2004 capital expenditures on its Red Rock Station (search) project that will open early next year and increased land value throughout the Las Vegas Valley.

Station said it was making progress on four new management contracts with Indian tribes, but said timing continues to be difficult to discern. "However, we continue to believe that we'll have a steady stream of management free income through at least 2014 from these contracts," Christenson said.

Station shares, which have risen 21 percent over the past three months, closed up $2.26, or 4 percent, to $58.85 in trading on the New York Stock Exchange (search) on Monday.